Can States Fund BDS?

Abe Foxman says that banning the use of public money to support companies that boycott Israel is unconstitutional and illegal. Is he right?

By Eugene Kontorovich, TABLET

In the latest act of a decades-long fight against discriminatory boycotts of Israel, two states have passed, and several are considering, legislation that protects their taxpayers from inadvertently underwriting such boycotts. Legislation recently passed by Congress denounced “politically motivated” boycotts of Israel.

In recent months, South Carolina has passed a law restricting state contracting with those who boycott on a nationality basis (the law is not limited to Israel; I advised on the drafting), and Illinois will prevent its pension fund from holding stock in boycotting companies. Legislators in these and other states have concluded that the movement to undermine the world’s only Jewish country through boycotts—while professing noble motives—is a thinly veiled form of anti-Semitism.

These laws have bipartisan support, and they passed unanimously. They enjoy the broad support of mainstream Jewish organizations. Yet some, including Anti-Defamation League head Abraham Foxman, have expressed concerns that legislation that “bars BDS activity by private groups” would raise First Amendment concerns.

Such concerns are entirely misplaced. The current legislation by states does not bar any BDS activity and does not otherwise violate the First Amendment. Indeed, these laws are far milder versions of long-standing federal anti-boycott laws that were adopted through the vigorous efforts of the ADL itself and that have enjoyed broad and uncontroversial support ever since.

The new laws only relate to state contracting and public pension funds’ investments. They simply limit a state’s business relationships with companies that discriminatorily limit their own business relations. These laws do not prohibit or penalize any kind of speech. Proponents of boycotting Israel are free to call for such boycotts, encourage others to join them, and participate in them. As the BDS movement itself admits, these laws will not prohibit their activities.

Moreover, the First Amendment allows states to place conditions on doing business with them. Anti-discrimination restrictions on government contractors are commonplace and a normal requirement for government funding. The federal government and many states require contractors and subcontractors to not discriminate on, among other things, “the basis of sexual orientation or gender identity.” There is no doubt that the First Amendment protects a potential contractor’s belief that homosexuality is wicked behavior and even his decision to “boycott” gays. But as President Barack Obama said when signing the executive order prohibiting such discrimination in government contracts, the federal government is not required to “subsidize discrimination.”

Civil rights organizations welcomed such restrictions on contractors, and courts have not suggested that they violate free speech rights. Of course, some who oppose discrimination against gays may think boycotting Israel is more defensible. But First Amendment protection or lack thereof does not turn on the popularity or content of the relevant views.

Furthermore, governments can, without any constitutional question, attach conditions relevant to the actual expenditure of funds. A state can reasonably decide that a company that boycotts Israel puts politics ahead of business considerations in a way that makes the company less effective and harms contract performance: For example, a company may fail to use the best subcontractors, products, or partners because of their national origin and thus simply do a worse job. Such a determination is well within the legitimate scope of legislative judgment.

For example, wearing obscene T-shirts is a clear First Amendment right, more obviously expressive than refusing to do business with Israeli companies. Yet states can obviously rethink contracts to companies whose executives habitually show up to meetings in such shirts, because wearing obscene T-shirts is also bad business.

All of this assumes that a business’s decision to boycott Israeli companies is itself protected speech. The First Amendment protects speech, not conduct. While speech does not lose its protection by being part of conduct, conduct does not become protected by having a speech component. It is the overall character of the action that counts for constitutional purposes. When companies do business or don’t do business with other companies, it is not generally to send a message, but to make money. Even with Israel boycotts, the act of boycotting itself does not explain its motives, or express any political viewpoint. Companies may boycott Israel to prevent further harassment from the BDS movement; to curry favor with Arab states; or out of mere anti-Semitism; or to protest particular policies of Israel’s. Unless the company explains, its action has no message. That is why the action is not speech, only the explanation.

For example, the Supreme Court unanimously held in Rumsfeld v. FAIR that the government could condition federal funding to universities on their providing access to military recruiters. The Court rejected that argument that dealing with military recruiters sends a message of support for the military’s policies or any other kind of message:

[T]he conduct regulated by the [law] is not inherently expressive. … These actions were expressive only because the law schools accompanied their conduct with speech explaining it. … The fact that such explanatory speech is necessary is strong evidence that the conduct at issue here is not so inherently expressive that it warrants protection.

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U.S. laws against boycotts are not new. The Arab states have promoted a boycott of Israel since the country’s creation. In 1977, Congress passed a law prohibiting companies and individuals from participating in boycotts “fostered” by foreign countries. Notably, the Anti-Boycott Law applies in full to boycott participation motivated by ideological reasons. It is no defense under the law to argue that one agrees with the policies and purposes of the boycott and joined it merely to express this viewpoint.

It is also worth noting that the anti-boycott statute does not make any exceptions for boycotts targeted at Israeli firms in the West Bank or Golan Heights. Congress understood that while the boycott’s proponents certainly opposed Israel’s presence in those places, they also opposed Israel’s existence within any boundaries, and the goal of all parts of the boycott is to destroy the Jewish state. The same is true of today’s boycott proponents, as BDS founder Omar Barghouti candidly admits.

Moreover, existing federal legislation is far harsher than the current state bills: Federal laws actually prohibit boycott participation, and punish it with punitive fines and under certain circumstances, up to 10 years in jail. The state contracting and pension laws prohibit nothing and punish nothing. The constitutionality of the Federal law has gone largely without question, and courts have upheld it in the few cases raising First Amendment challenges. See Karen Mar. Ltd. v. Omar Int’l, Inc.,322 F. Supp. 2d 224, 227 (E.D.N.Y. 2004) (“Section 2407 is a constitutional statute.”) See also Gen. Elec. Co. v. New York State Assembly Comm. on Governmental Operations, 425 F. Supp. 909, 916 (N.D.N.Y. 1975) holding that New York State legislative investigation and subpoena into companies’ participation in boycott of Israel does not violate the First Amendment.

Finally, it is worth noting that the First Amendment simply does not apply to the extraterritorial actions of foreign corporations, and only weakly applies to the extraterritorial conduct of U.S.-based entities. Given that commercial speech is more weakly protected than non-commercial speech, and given that speech involved here is entirely congruent with conduct, and involves an extraterritorial aspect, any First Amendment protection of the relevant conduct would be quite attenuated.

Indeed, BDS proponents must concede the constitutionality of this legislation. They like to wrap themselves in the legacy of state divestment campaigns from South Africa. But if states can choose to not do business with South African companies because of their politics and practices, it also means they can choose to not do business with private companies because of other discriminatory policies—like a boycott of Israel.

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Boycott proponents seeking to confuse people about the constitutionality of the new state laws inevitably cite the Supreme Court’s 1982 decision in NAACP v. Claiborne Hardware Co. (1982). That case found that state action to shut down efforts to organize a consumer boycott against white shopkeepers violated the First Amendment. But it takes more than waving one’s hands in the direction of a Supreme Court case to make a legal argument. Clairborne Hardware has nothing to do with the present state laws.

In that case, the Court found that a state could not ban “political meetings and organization, picketing, and speeches by multiple citizens” involved in a consumer boycott. The current laws do not deal with any such speech by businesses. A business could call for a boycott of Israel organize rallies to this effect—and not be affected by this legislation. The current laws do not deal with consumer boycotts at all, but with boycotts by businesses, which are far more conduct than expression. Moreover, the NAACP case involved a complete state ban on such protected private activity. Here, there is no ban whatsoever.

What Claiborne Hardware means is that states cannot try to ban the “BDS Movement,” or make them liable for damages from the boycotts they endorse. They are free to organize and promote boycotts, and the companies they target are free to comply or not. But that does not mean that a company’s categorical decision to not do business with certain other businesses for political, rather than business reasons, cannot be taken account of by the state when choosing whether to contract or invest with it.

In the 1970s, the U.S. passed laws that prohibited compliance with boycotts of Israel promoted by the Arab League, because the Arab states happened to be the principal agent behind the campaign of economic warfare against the Jewish state. Now, parallel to changes in the character of actual warfare, the economic war is spearheaded by a network of non-state organizations with background state support. Not surprisingly, the U.S. is updating its anti-boycott laws to reflect the new face of the old threat. Just as the old laws were entirely constitutional, their milder 21st-century descendants are, too.